The City cracks down on restaurant surcharge fraud with amnesty program, sends letters to offenders [Updates!]

Update, Jan. 27:Here’s the list of restaurants, according to the city, that collected more surcharges in 2011 than they spent on health care. It’s important to note that all the restaurants on the list are not necessarily Herrera’s targets, though it’s been reported that he’s working off the list. And here’s the front page article with the restaurateurs’ reactions and what the list means.

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This morning, The Chronicle’s Stacy Finz and John Cote broke the news that San Francisco is getting serious about restaurants that are profiting from those now-ubiquitous health care charges on menus. About six months after a civil grand jury condemned the same charges, City Attorney Dennis Herrera is launching a new “enforcement initiative” with the goal of repairing a system that, as Finz and Cote reported, saw roughly only a third of the estimated $14 million collected in worker health care surcharges in 2011 actually used for medical coverage.

Herrera held a press conference earlier today. Alongside assembly member Tom Ammiano, supervisor David Campos, supervisor David Chiu and two servers from Zazie Restaurant in Cole Valley, he detailed some of the finer points of the program.

The program offers partial amnesty to a handful of the worst offenders, though Herrera and co. are not revealing the criteria they used to determine the worst offenders. Nor are they sharing the names of the restaurants (yet). Owners of the worst restaurants of the bunch were sent letters this morning — in full, below — outlining their options.

In short, restaurants have until April 10 to come into compliance and avoid consumer fraud litigation. Herrera said that restaurants not on the City Attorney’s target list will be extended the same amnesty options. He also said that not every restaurant under investigation received a letter, and that the restaurants on the list varied in the extent of their violations. For some restaurants, the disparity between what they collected in surcharges and what they spent on health care was hundreds of thousands of dollars, while others were tens of thousands. [As noted by Finz and Cote, the names are being kept under wraps … for now.]

Another interesting tidbit is that Herrera revealed part of the reason why Patxi’s, which made a $320,000 settlement last week, was the only restaurant named so far.

“That’s an example of how a restaurant stepped up and did the right thing,” Herrera said. “When they became aware that they had an issue, and that we were looking at them, they had been in contact with the office of Labor Standards Enforcement. They came forward, voluntarily, and we negotiated a settlement to deal with the situation.

Restaurants in violation should come forward, Herrera said. “I would encourage all restaurants to handle this like Patxi’s did.”